Fireman's Fund Insurance v. Lindsey

Stephens, J. 1. Wliere a policy of fire-insurance provides that it insures for a term of five years 'in consideration of the payment by the insured of a part of the premium in cash and the balance in four equal yearly installments evidenced by an “installment note,” and where by both the policy and the installment note it is provided that, upon default by the insured in the payment of one of the installments payable upon the premium when due, all the remaining unpaid installments may be declared due and collectable, and that until such due and unpaid installments are paid the policy shall lapse and the insurer shall not be liable for any loss thereunder during such period of default, but that upon payment of the past-due installments the policy shall revive, there arises a contract of insurance for an entire period of five years, by the terms of which the insurer at all times during the entire period is under a contractual obligation to furnish protection, upon a compliance by the insured with his obligations under the contract as to payment of installments due upon the premium. The promise of the insurer to furnish protection under the terms of the contract, and the promise of the insured to make payments under the terms of the contract, are mutual, and each promise is a consideration for the other. May on Ins. (4th ed.), § 345-11; American Ins. Co. v. Klink, 65 Mo. 78; Minnesota Farmers &c. Ins. v. Olson, 43 Minn. 21 (44 N. W. 672); Darsey v. Ins. Co. of North America, 32 Ga. App. 458 (123 S. E. 622). 2. A lapse of the policy in accordance with its terms and its automatically ceasing to afford protection during a period of default by the insured in the payment of past-due installments on the premiums cannot amount to a failure of consideration. Therefore, in this ease, in which the [684] Insurer sought to recover installments past due on the premium note, the defendant’s plea of a failure of consideration by reason of a lapse of the policy set up no defense, and the court erred in overruling the plaintiff’s demurrer to the plea, and in thereafter directing a verdict for the defendant. Decided September 19, 1924. Judgment reversed. Jenkins, P. J., and Bell, J., concur. Smith, Hammond & Smith, James W. Harris, for plaintiff. H. B. King, for defendant.